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The Top 3 Best Practices in Employee Performance Management

Can you put a dollar value on employee performance? Yes, you can. The Gallup organization conducted a survey demonstrating that companies with more engaged employees far outperform their competition. Engaged employees improve brand reputation and add profits to the company's bottom line. Best practices in employee performance management involve a recognition of the link between performance and engagement.

The Performance/Engagement Link

The Gallup study went on to specify that companies with an average of 9.3 engaged employees for every single disengaged employee were able to post earnings per share (EPS) 147 percent higher on average than their closest competitors. When engagement fell to 2.6, those companies saw an EPS 2 percent lower than the competition. Multiply those percentages by your current annual revenues and you will have your own personal dollar value for engagement.

The point about engagement is so important because better engagement is directly tied to employee performance. That same Gallup survey showed that engaged employees are 21 percent more productive and deliver a 10 percent higher customer satisfaction rating.

Engagement also drops absenteeism by 37 percent and improves the quality of outputs by 41 percent. In a global survey of enterprise execs by Harvard, 71 percent identified "a high level of employee engagement" as the factor most likely to bring success.

Fortunately, the mechanisms of employee performance management are ideally suited to measuring and moving the needle on employee engagement. Here are the top three best practices in employee performance management that are putting companies on top of their markets in every industry.

1. Dual Focus

There's broad agreement on the link between performance or engagement, but which one should a manager focus on improving first? The answer is "both" according to survey data from Gallup. They reported, "Managers who emphasize one approach while ignoring the other risk alienating their team members, lowering engagement and damaging performance." At companies where managers help employees set their performance goals, those employees are 17 times more likely to be engaged.

2. Continuous Improvement

One of the central tenets of a lean organization is the idea that evaluations don't come once a year. That applies to people as well as projects. Employee performance is handled more effectively as an ongoing conversation. At a conference hosted by the Senior Professionals in Human Resources (SPHR) organization, senior management agreed that ongoing expectations and feedback result in better quality work, less rework and employees who are more confident about their contributions.

3. Analytics for Smarter Promotions

A general feeling of unfair rewards and advancement depresses morale and drives away the most ambitious employees. The link between company goals and professional achievement should be made explicit so employees know why certain individuals advance. Retention, development and succession planning initiatives should not be shrouded in secrecy but discussed every time there is an opening in management. Fast Company reported that using predictive analytics tools to make more intelligent and unbiased promotions results in a 48-percent increase in profitability and a 30-percent improvement in employee engagement.


Every company has its own challenges and quirks, but people share the same motivations everywhere. Engaged employees are better performers. Managers have a responsibility to tie engagement metrics to performance reviews, discuss performance throughout the year and make more logical promotions in line with company objectives. These employee performance management best practices pay off in a better workplace, improved customer satisfaction and higher revenues.

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